February 2019 Statement

Produced in response mainly to the Housing Minister, Kit Malthouse, following his contribution to the Westminster Hall Debate on 22nd January 2019. We are getting similar messages in reply to our own representations from the Department for Housing, Communities and Local Government. These defend the status quo on voluntary adoption and local 106 agreements passing the buck back to Local Authorities and disregarding the role of their own National Planning Policy Framework. There is also a reluctance to rise to the challenge of creating legislation to cover estate charges, although we do note that recently there has been a slight shift towards talking about a legal framework rather than simply access to the First Tier Property Tribunal. We have reports of two cases where the FtT has been unable to hear freehold estate charge cases due to the lack of legislation.

Statement from HorNet (Home
Owners Rights Network)

on the Housing Ministers
proposals for Estate Charges

HorNet
welcomes the government’s belated recognition that there is a serious
national problem over estate charges, but there is a long way to go
as Helen Goodman pointed out in her closing speech on The Estate Fees
debate (Westminster Hall 22/01/19) which she secured to hold the
Housing Minister to account.

It
became very clear from Housing Minister Kit Malthouse’s speech that
the government seems intent on moving forward with the sticking
plaster approach of tacking estate charges onto existing leasehold
rights. There was no mention of repealing the section 121 remedies
available to the rent charge owner to effectively repossess a
“freehold” home and no mention of compensating home buyers for
purchasing a home at full market value which has been subsequently
devalued by these estate management arrangements.

We
welcome the idea of government using “Help to Buy” as a lever to
prevent future private estates, but this will do nothing for those
already trapped.

Indeed
it also became very clear that Kit Malthouse was not prepared to
acknowledge or address the very major issue of the poor quality
estate construction and maintenance which is causing long term blight
on these developments. Instead he focused on protecting the status
quo, insisting that section 106 agreements and adoption by councils
remain local decisions, when we all know that councils make these
decisions always looking over their shoulder at central government
legislation and policy. They do not want to waste their limited
funding on planning appeals where central government does not uphold
the local decision. It is patently untrue that local authorities have
real autonomy. HorNet believe that developers favour private managed
estates because they can retain an asset and save on construction and
adoption costs.

In
his speech the housing minister states “There
is only so much money that can be extracted from a particular housing
development.” This
is a pretty clear admission that government uses private house
builders to fund infrastructure and will extract as much as they can.
In respect of the public open spaces being “donated” via 106
agreements instead of adopted, it is the residents who pick up the
tab, NOT the developer. Government fails to acknowledge that the more
they extract from private house builders, the more likely it is that
home buyers will foot the bill to maintain profit margins.

The
proposals he put forward simply will not work to obtain a fair deal
for home buyers. Why??

Most
freeholders deeds contain clauses which allow the management company
to recover its legal fees via the estate charges, so win or loose,
the company carries no financial risk in using the courts system of
which the First tier Tribunal is a part. Access to the FtT will only
be of use if this loophole is plugged. Even if this is done, the
system is imbalanced in favour of land owners and investors, as
leaseholders know to their cost.

Why
is government offering freeholders the same rights as leaseholders
when it knows these rights do not give them fair redress? Indeed the
abuse of the leasehold system is also subject to government enquiry
right now. This does not give us any confidence that government
really wants to help new build home buyers, but rather has the
interests of property developers and managers as their priority.

Proposals
for home owners to apply to a tribunal to change management companies
will not work for the majority, as there is quite a high turnover of
ownership on new estates and problems for owners working together due
to absentee landlords. Why should home owners have to go to the
trouble and expense and responsibility of managing estates which
belong to a private company and are designated public open space?
There is no reason other than asset creation and income generation
why these areas should not be managed publicly.

Enfranchisement,
where the home owners gain ownership of the land in common, may be a
way forward for existing estates, although measures would need to be
put in place to indemnify residents from defects in construction.
This is especially important as we know that construction has been on
the cheap, and sometimes not finished at all. HorNet believes that
councils should adopt these areas sub standard, as they are
responsible for allowing the private estate model without taking into
account the risk of future blight. Since only the landowner can offer
the estate for adoption, the residents would have to take ownership
of the land first.

On
quality the minister states: “We
expect all housing developers to deliver good quality housing and
estate facilities, to deliver it on time, and to treat house buyers
fairly.”
We say it is no use just expecting
these considerations, measures must be put in place to ensure that
shareholder value and profit do not override them, which is exactly
what is happening now with the private estate model. HorNet have
informed the MHCLG on more than one occasion of the sub standard
nature of estate delivery and this message has been re-enforced by
Helen Goodman and her fellow MPs in the debate.

Maintenance
has to be paid for – we agree with the minister on this. Many
HorNet members have said they would be prepared to pay the council
(or parish/town council) for estate upkeep. It is up to government to
look at the problem of funding and come up with a fair solution. One
which does not involve private companies ripping off residents, and
where local communities and residents fund these amenities together,
since they are generally open to all to use and abuse.

Estate
management by private companies is expensive – on average at least
50% of charges is simply for management costs. If there is an estate
management company, it opens the door for high and arguably
unnecessary fees for permission to alter properties and for moving
and re mortgaging. We have reports from members of house sales being
blocked or delayed because the management company is a party to the
legal transfer. It should not be possible for this to happen with a
freehold
property. What do these companies actually do which could not be done
by local authorities??

In
our view they do not add value for the home buyer, only an income
stream for themselves. We have numerous cases where a small strip on
land is the only “estate” being managed. These are cynically
known in the industry as “ransom strips”. Their existence
certainly lends credence to the idea that this whole estate
maintenance model for residential homes is a scam, saving money for
developers and making it for property management companies.

To
give an idea of the size of the problem here are some statistics:

HorNet
has 4500 members on social media and a database of over 400 estates
representing over 80,000 households.

The
average estate charge is approx £250 per year, although there is
huge variation.

The
private estate model has been in use for at least 15 years and the
norm for 10 years.

The
government don’t count private estates, but do count new homes
delivered. 1.3 million in the last 10 years, most of which will be on
estates, and most of them privately owned.

Based
on this a conservative estimate is at least 1 million affected
households – which equates to a £250 million per annum property
maintenance income, not to mention the value of the land held.

HorNet
have evidence from across the UK of the problems for home owners and
for the estates themselves, and we would like the government to start
a dialogue with us so that we can brief them on precisely what is
happening on the ground and work to create a balanced and fair system
for everyone.

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Can you help us to succeeed?

Our Mission

To challenge the existing property laws which leave us open to exploitation, through: political lobbying, media attention and through the courts in a form of a UK test case.

Although we offer our members moral support, we are not qualified to give legal advice so cannot help in this way.

We encourage everyone to help each other by supporting the aims in our mission.

Join our groups to network and share information, help our campaign by taking action as on our Take Action page

Who are We??

We are a group of ordinary home owners who feel exploited by their respective land management companies on privately owned managed estates with charges. We were initially put in touch with each other either by the Home Owners Alliance or the Greenbelt Action Group. Our co-ordinators are Halima Ali and Cathy Priestley.

We feel that isolation is a problem for home owners and that a network for mutual support and exchange of information initially would help home buyers who find themselves inadvertently in this trap. We are campaigning for a change in the law to offer us protection and redress and ultimately scrap this model being used for residential properties.

We began with this site and a Facebook group for discussions (April 2016). People who prefer not to use Facebook can comment on The Buzz articles (public) in our forum (private), subscribe to our newsletter or simply contact us to let us know they are there.

Strength in numbers has succeeded in raising the profile of the issue and our voice is growing louder!

By 20th March 2019 we have over 4800 in our FaceBook group and 486 estates representing over 91,000 households.